The real estate market bounced in March as turmoil in the banking sector subsided. Denton County home sales nearly doubled from the January lows, putting sales up 13 percent from a year ago. Pending contract edged up as well, placing contract activity 10 percent higher than March of last year.

Some context is in order here since activity is still light compared to historical trend. This is largely due to diminished inventory levels. Denton County was still sitting on 1.8 months of supply in March. That’s down from the 2.9 months we saw in October 2022 as surging interest rates put the brakes on the housing market.

There has been no spring bounce in resale inventory so far in 2023. That is keeping sales activity subdued. The lack of resale inventory in the market has been a gift to new home builders so far in 2023. Builders have taken the opportunity to sell off some of the large new construction backlog they are still sitting on. New homes accounted for over a third of the total local sales and contracts in March. That’s well above the twenty percent norm prior to the pandemic.

Tight inventory levels are also causing local home prices to bounce again. The median home price in Denton County came in at $441,389 for March. That’s 4.4 percent lower than a year ago but roughly $16,000 higher than where we started the year. Average prices bounced to $528,649 in March, or 4.3 percent lower than the same time a year ago. We should still see two more negative year-over-year prints with prices after last spring’s spectacular FOMO mania.

With the rebound in activity to start 2023 days on market fell slightly, but it’s still taking almost two months to sell the average Denton County home. There’s a solid bid for more affordable homes, but we’re not back to the crazy bidding wars we saw last spring. Average percent of list price edged up to 95.9 percent in March. Sellers are adjusting to the new reality of a better, but not great, housing market.

The market has experienced a lot of volatility so far in 2023. Mortgage rates have whipsawed back and forth. The banking contagion from Silicon Valley tech bros and leveraged speculators provided enough fear in the markets to push rates down temporarily, but demand hasn’t cratered. Buyers are still in the market, and that demand is keeping inventory levels low for the time being.

U.S. Mortgage Rates April 6 2023

The March unemployment report showed the economy added another 236,000 jobs. The U.S. unemployment rates stood at 3.5%, near the lows for this cycle. The labor market is still fairly tight, and prices are still elevated. Americans are sitting on an elevated (but shrinking) pile of savings. This helps to understand the recent bounce in the housing market.

Unemployment Rate vs Dallas Home Prices February 2023

Headline inflation for March came in at 5.0 percent. That’s certainly improvement from the recent highs, but core inflation (ex food and energy) remains stubbornly high at 5.6 percent. That’s up slightly from the February reading of 5.5 percent.

Consumer Price Index and Core Inflation March 2023

The Silicon Valley banking crisis caused the Federal Reserve to intervene and provide temporary liquidity to the markets. The “it’s not QE” has now resumed back to quantitative tightening. The Fed still has a huge of work to do in terms of shrinking the incredibly bloated balance sheet. It’s absolutely laughable some supposedly serious people are calling for rate cuts when the balance sheet draw-down has barely made any progress.

Fed Balance Sheet April 5 2023

With prices still elevated and homes seeing a solid bid, it’s difficult to imagine a scenario where the Fed would pivot or cut interest rates. It appears the Federal Reserve will have to remain in inflation-fighting mode until the next recession arrives. That will not be what the real estate industry wants to hear, but it is what it is. If you are in the market to buy or sell a Denton County home being flexible and adaptable will likely serve you well.